Waiting for the fog to clear

US markets continue to be supported in the warm glow of higher oil prices, following the Trump-led optimism but Asian markets remain in the shadows of uncertainty.

Non Farm Payroll
Source: Bloomberg

Early morning data came in from South Korea suggesting that the Q3 GDP had in fact been lower than the preliminary estimate, at 2.6% YoY, down from 2.7% YoY previously and 3.3% YoY in Q2. The slowdown of this advanced Asian market goes against the Asian Pacific trend of a pick-up in the third quarter, weighed by exports and construction according to a Bank of Korea (BoK) official. The KOSPI, an early mover, recorded a corresponding dip at the open, dragged down also by the weak overnight leads.

The oil-led optimism continue to keep the DJIA buoyed, though we failed to see a fresh high being printed on Thursday, something we have perhaps taken for granted since President-elect Donald Trump emerged victorious. Prices plateaued around 19,200 in the previous session held up primarily by the financial (+2.37%), energy (+0.84%) and industrial (+0.68%) sectors.

The more comprehensive S&P 500 index likewise saw the same suspects leading gains, though the greater slant of the composition towards IT companies brought the overall index into red. Concerns over the impact of President-elect Donald Trump’s trade policies have made the sector a punching bag since the elections.

All eyes will be focused on the US non-farm payrolls data in the day ahead where the market consensus has been pointing towards a higher-than-previous figure. The USD index briefly rose overnight following the release of the November ISM manufacturing index which surprised on the upside at 53.2, the highest seen since February 2015.

Nevertheless, correction set in ahead of the major event and the USD index eased to trade below 101.00 into Friday morning. Expect the consolidation to sustain ahead of the key data, despite the reduced impact this NFP data will have on the next Fed FOMC decision.

Asian markets could still see the week ending in gains despite the reversal that may set in today from the lack of strong leads. The MSCI Asian Pacific index had picked up 0.39% since the start of the week as concerns over President-elect Donald Trump’s policies eased.

Nevertheless comparing with the open on 9 November, the index has shed 1.15% and an even greater 1.90% excluding Japan, signalling the uncertainty that shrouds Asian markets while our North American trade partner rallies. 

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